The Australian Bureau of Statistics just released the 4th quarter GDP growth numbers for the economy and the results were a little stronger than expected quarter on quarter printing 0.8% seasonally adjusted compared to market expectations of 0.7%.
But it was the big lift in the year on year growth rate to 2.8% from 2.5% expected and 2.3% last which is the big result and speaks of an economy doing better previously thought for 2013.
The Aussie dollar has shot up 30 points to 0.8987 as a result straight after the number was released and in an uncertain world it is the Aussie dollar’s reluctance to fall – well founded it now seems, based on this growth rate – which will trouble the RBA more than anything else in these data.
Looking more closely at the break up of the data net exports were a strong contributor growing 0.6% while final consumption grew 0.5% as well. Public fixed capital formation was up 0.2% as were inventories. These rises were partially offset by falls in private gross fixed capital formation which dropped 0.5%.
On an industry basis mining and financial and insurance services were the standouts growing 0.6% and 0.5% respectively.
Interestingly, and something the RBA will be watching closely is that the household savings ratio has fallen back to 9.7% meaning Australians are spending more of their disposable income.
Also worth noting, and something that might help explain why employers have been reluctant to hire new workers over the past year, the ABS said that the trend in Non-farm Real Unit Labour Costs (a link between productivity and the cost of labour in producing output) fell 0.7% which means Australia is more productive.
This is good data and it will reinforce the Aussie dollar’s safe harbour status in the current geo-political environment. While this may not please the RBA given its focus on achieving “balanced growth” in the quarters ahead there is no denying that the RBA would always prefer the stronger starting point for 2014, given the transition the economy is going through.
Indeed the ANZ Economics team in a note since the release of the GDP data noted that,
growth looks to be below trend, although there are some positive signs emerging. While the windback in mining investment expected over the next couple of years will weigh on growth, there are some early signs that other sectors of the economy are starting to pick up: housing investment is set to pick up strongly this year, household consumption spending looks to be trending higher, and the outlook for non-mining investment looks to be improving.
The period of RBA interest rate “stability” remains in place but this data adds more weight to an eventual move higher either later this year or early in 2015.